Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Wisconsin Energy — Investor Presentation (August 2014)
37 slides from Wec Energy's investor presentation, August 2014
Slide 1: Wisconsin Energy Corporation August 2014
Wisconsin Energy Corporation V- August 2014
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information Much of the information contained in this presentation is forward-looking information based upon management’s current expectations and projections that involve risks and uncertainties. Forward-looking information includes, among other things
Slide 3: Overview
Overview Retail Electric and Gas Utilities Largest electric and gas company in Wisconsin 1.1 million electric customers 1.1 million natural gas customers 3
Slide 4: Investment Thesis
Investment Thesis An “Earn and Return” Company with a Low Risk Profile Positive free cash flow Targeted EPS growth of 4%-6% Best in class dividend growth - targeting a dividend payout ratio of 65%-70% of earnings in 2017 Implies 7%-8% dividend growth annually 2015-2017 Proven management te
Slide 5: A Track Record of Performance: Consistent Earnings and Dividend Growth
A Track Record of Performance Consistent Earnings and Dividend Growth Wisconsin Energy is the only company in the S&P Electric Index S&P Utilities Index Philadelphia Utility Index Dow Jones Utilities Average that has grown earnings per share and dividends per share every year since 2003 5
Slide 6: Industry Leading Total Shareholder Returns
A Track Record of Performance Industry Leading Total Shareholder Returns One Three Five Ten Year Year Year Year Wisconsin Energy 16.1% 55.5% 131.8% 227.1% S&P Utilities Index 13.2% 37.5% 62.3% 141.8% S&P Electric Index 7.8% 29.7% 38.7% 132.4% Philadelphia Utility Index 11.0% 31.6% 53.0% 137.1% Dow J
Slide 7: Industry Leading Dividend Growth
A Track Record of Performance Industry Leading Dividend Growth $1.56 $1.45 $1.20 $1.04 $0.80 $0.68 $0.50 $0.54 $0.44 $0.46 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Targeting dividend payout ratio of 65 - 70 percent of earnings in 2017 7
Slide 8: Leading Reliability and Customer Satisfaction
A Track Record of Performance Leading Reliability and Customer Satisfaction Named the most reliable utility … In the U.S. in 2013 In the Midwest nine of the past 12 years During 2013, achieved highest customer satisfaction ratings in past decade … likely best ever 8
Slide 9: Power the Future Investments – Natural Gas
A Track Record of Performance Power the Future Investments – Natural Gas Meeting the Region’s Energy Needs Capacity 1,090 MW Investment $664 million ROE 12.7% Equity 53% In Service Dates Unit 1 – July 2005 Unit 2 – May 2008 Cost Per Unit of Capacity $609/kW 9
Slide 10: Power the Future Investments – Coal
A Track Record of Performance Power the Future Investments – Coal Meeting the Region’s Energy Needs Capacity 1,030 MW1 Investment $2 billion1 ROE 12.7% Equity 55% In Service Dates Unit 1 – February 2010, Unit 2 – January 2011 Cost Per Unit Approximately of Capacity $1,950/kW 1 All capacity and inves
Slide 11: Dramatic Change in Environmental Performance
A Track Record of Performance Dramatic Change in Environmental Performance From 2000 to 2014... Power plant capacity up 50% Emissions of nitrogen oxide sulfur dioxide down 80% mercury particulate matter 11
Slide 12: Strong Financial Foundation
A Track Record of Performance Strong Financial Foundation Positive Cash Flow … Project $500 million of free cash flow from 2014-2018 Expect to generate free cash flow each year after reaching target dividend payout ratio in 2017 Solid credit ratings … Well-Funded Pension … Moody’s S&P Fitch Ov
Slide 13: Summary of our Core Business
A Track Record of Performance Summary of our Core Business Rate Base and Power the Future Investment at 12/31/13 Retail Electric and Gas Utilities $10.0 Billion Wisconsin, Michigan, and FERC $0.7 jurisdictions $2.7 48.5% to 53.5% equity for Wisconsin Electric $2.7 10.4% allowed ROE 45% to
Slide 14: Major Segment Earnings for 2012 – 2014
Where We Go From Here Major Segment Earnings for 2012 – 2014 Projecting earnings per share growth of 4-6% annually from the 2011 base 2012A 2013A 2014E Electric and Gas Utilities $1.55 $1.67 $1.72 to $1.78 Power the Future (1) $0.69 $0.72 $0.73 Wholesale Electric $0.17 $0.18 $0.19 Transmission (2) U
Slide 15: Delivering the Future
Where We Go From Here Delivering the Future From 2014 through 2018, our plan is to invest $3.2 to $3.5 billion in needed infrastructure projects that will: Renew and modernize our grid Meet new environmental standards Reduce our operating costs for customers From 2014 through 2023, our pla
Slide 16: Five-Year Capital Investment in our Retail Utilities
Where We Go From Here Five-Year Capital Investment in our Retail Utilities (Projected Investment, In millions) $900 $800 $778 $700 $668 $668 $617 $607 83 330 $588 $600 188 194 200 $500 189 188 $400 224 208 $300 220 211 214 227 $200 409 426 359 388 329 173 342 157 108 84 137 125 $100 83 82 96 97 48 6
Slide 17: Delivering the Future – Electric Overview
Where We Go From Here Delivering the Future – Electric Overview Between 2014 and 2018, we plan to: Rebuild 2,000 miles of electric distribution lines that are more than 50 years old Replace: 18,500 power poles 20,000 transformers Hundreds of substation components 17
Slide 18: Delivering the Future – Gas Overview
Where We Go From Here Delivering the Future – Gas Overview Between 2014 and 2018, we also plan to: Replace: 1,100 miles of vintage plastic and steel gas mains 83,000 individual gas distribution lines 233,000 meter sets 18
Slide 19: Ten-Year Capital Investment in our Retail Utilities
Where We Go From Here Ten-Year Capital Investment in our Retail Utilities (Projected Investment, In millions) $900 $800 $778 Renewable: $250 - $450M $700 $668 $668 $650 $670 $660 $617 $607 $620 83 330 $588 $590 $600 188 260 250 194 200 210 260 $500 189 188 210 $400 224 208 $300 220 211 214 227 230 2
Slide 20: Ten-Year Capital Projection 2014 - 2023
Where We Go From Here Ten-Year Capital Projection 2014 - 2023 $6.5 to $7.1 billion investment in our core business Power the Future: Plus Additional Growth Opportunities $0.2B $2.7 ATC – Traditional Footprint $3.0 to $3.6 billion WEC Ownership 26.2% DATC – Outside ATC Traditional Footprint R
Slide 21: Western Wisconsin Gas Expansion
Where We Go From Here Western Wisconsin Gas Expansion Additional natural gas distribution Sand Plants – Wisconsin capacity needed to address reliability and to meet growth in customer demand Frac sand mining - increase from 10 to 115 licensed sand mining operations since 2010 Propane conversio
Slide 22: Renewable Energy Investments
Where We Go From Here Renewable Energy Investments Biomass plant completed 50MW Investment of $269 million Commercial operation began in November of 2013 Renewable fleet in place Glacier Hills Wind Park (162 MW, in service since 2011) Blue Sky Green Field Wind Park (145 MW, in service
Slide 23: Valley Power Plant
Where We Go From Here Valley Power Plant Converting Valley from coal to natural gas Unit 1 conversion underway Targeting completion for both Units 1 and 2 in late 2015 Follows construction of a gas pipeline upgrade with expected in-service in 2014 Projected conversion cost for Valley: $65
Slide 24: Twin Falls Hydroelectric Powerhouse
Where We Go From Here Twin Falls Hydroelectric Powerhouse Building a new powerhouse at Twin Falls as existing powerhouse is in need of repair Construction began in the fall of 2013 with scheduled completion in 2016 Expected cost: $60 to $65 million 24
Slide 25: Fuel Flexibility Project
Where We Go From Here Fuel Flexibility Project Goal: enable our Oak Creek expansion units to burn both Powder River Basin (PRB) and bituminous coal To Date: have achieved sustained operation on 20% PRB coal blend In July, asked the Wisconsin Commission to approve $25 million of additional capi
Slide 26: Wisconsin Rate Case Summary
Where We Go From Here Wisconsin Rate Case Summary Wisconsin has biennial rate cycle Two year forward looking test years Apply in 2014 for 2015 and 2016 rates Settlement for ROE, capital structure, and base rate changes reached in May Wisconsin Electric ROE of 10.2%, Wisconsin Gas ROE of 10
Slide 27: Presque Isle Power Plant
Where We Go From Here Presque Isle Power Plant Entered into ‘System Support Resource’ (SSR) agreement with MISO in January 2014 for payments to support operation of Presque Isle power plant Filed for next SSR effective October of 2014 Several recent FERC orders may impact the SSR payments Al
Slide 28: Growth at American Transmission Company
Where We Go From Here Growth at American Transmission Company Projected Capital Expenditures Key Assumptions (Millions of Dollars) ATC rate base at year end 2014 is projected to be about $2.9 billion $541 ATC projects a need for $3.0-$3.6 billion of transmission improvements $411 $370 in its foo
Slide 29: DATC
Where We Go From Here DATC PHASE 1 N South of Chicago PHASE 8 Cincinnati/Ohio area S Joint venture between Duke Energy and ATC (DATC) Ownership is split 50/50 between Duke and ATC DATC has identified three distinct investment opportunities California’s Path 15 transmission line (purchased in
Slide 30: Industry Leading Dividend Growth
Where We Go From Here Industry Leading Dividend Growth The board of directors raised the quarterly dividend in January to 39 cents a share – equivalent to an annual rate of $1.56 a share Represents a 30% increase over the rate in effect during 2012 The board of directors also affirmed a target
Slide 31: Key Takeaways on Wisconsin Energy
Key Takeaways on Wisconsin Energy An “Earn and Return” Company with a Low Risk Profile Power the Future program now complete Highly visible earnings and strong cash flow Well-managed utility franchises with rate base growth Investment in American Transmission Company provides an additional r
Slide 32: Appendix
Appendix
Slide 33: Projected Rate Base
Where We Go From Here Projected Rate Base Average Total Utility Rate Base $9 $7.1 $7.5 $8 $6.8 $0.3 $0.1 $6.6 $0.1 $7 $0.3 Billions of Dollars $6 $5 $4 $7.5 $8.0 $6.7 $7.3 $3 $2 $1 $0 ($0.4) ($0.6) ($0.7) ($0.6) -$1 2013A 2014E 2015E 2016E PPE CWIP All Other* *All other is comprised of customer adva
Slide 34: Electric Retail Customer Base
Electric Retail Customer Base 2013 Retail KWh Sales Mix* Other 1% C&I Sector % of 2013 Largest Electric Large C&I 30% Segments* C&I Sales Residential 33% Office 13.5% Small C&I Retail 7.0% 36% Primary Metals 6.6% Health Care 6.3% 2013 Retail Revenues* Food 5.7% Other Education 5.3% 1% Hospitality 5.
Slide 35: Forecast of Electric Sales
Forecast of Electric Sales* 2014 Forecast vs. 2014 Forecast vs. 2013 Actual 2013 Normalized Residential -0.6% 0.4% Small C&I -0.4% 0.3% Large C&I (ex. Mines) 1.0% 0.9% Total Retail w/o Mines 0.0% 0.5% *Delivered Volumes 35
Slide 36: Forecast of Electric Sales
Forecast of Electric Sales* 2014 Forecast vs. 2014 Forecast vs. 2013 Actual 2013 Normalized Residential -0.6% 0.4% Small C&I -0.6% 0.1% Large C&I (ex. Mines) -0.7% -0.8% Total Retail w/o Mines -0.6% -0.1% *Supply and Distribution Volumes 36
Slide 37: Regulatory Environment
Regulatory Environment Wisconsin Commission Michigan Commission 3 Commissioners 3 Commissioners Gubernatorial appointment, Gubernatorial appointment, Senate confirmation Senate confirmation Chairman: Gubernatorial Chairman: Gubernatorial appointment appointment Terms Terms 6 ye
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